LivePerson(LPSN) - 2019 Q4 - Annual Report

PART I Item 1. Business LivePerson offers AI and human-powered messaging solutions via its LiveEngage platform, focusing on conversational AI expansion and market growth - LivePerson's core business is making life easier for people and brands through messaging powered by AI and humans, leveraging mobile devices as the center of digital communication[12][266] - The LiveEngage platform enables businesses to deploy messaging, bots, and AI at scale across various digital channels (mobile apps, web, SMS, social media, third-party messaging platforms like WhatsApp, Apple Business Chat, Alexa)[13][54][267] - Key benefits for customers include increased agent efficiency (up to 40 conversations per agent), labor cost reduction (at least 50%), improved customer satisfaction (up to 20 percentage points), increased sales conversion (up to 20%), and reduced agent churn (up to 50%)[17][271] - The company views the shift from 1-800 numbers, websites, and apps to conversational messaging as a significant market opportunity, estimating a $60 billion go-to-market opportunity, with nearly half tied to service and the other half to sales, marketing, social, and brick-and-mortar use cases[24] - LivePerson's strategy includes building awareness and adoption of the Conversational Space, increasing messaging volumes through a broad ecosystem and AI/automation, attracting top AI talent, and bringing best-in-class AI/ML technologies to market[32][34][39][40] Revenue Contribution by Service Type (2017-2019) | Service Type | 2019 (% of total revenue) | 2018 (% of total revenue) | 2017 (% of total revenue) | | :--------------------- | :------------------------ | :------------------------ | :------------------------ | | Hosted Business Services | 77% | 79% | 82% | | Professional Services | 14% | 13% | 10% | | Consumer Services | 8% | 8% | 8% | Key Business Metrics (2018-2019) | Metric | 2019 ($) | 2018 ($) | Change (YoY) | | :----------------------------------------- | :---------- | :---------- | :----------- | | Enterprise & Mid-Market ARPU | $345,000 | $285,000 | +21.05% | | Enterprise & Mid-Market Revenue Retention | 105%-115% | ~110% | Maintained | | Enterprise Customers on Messaging | ~55% | ~40% | +15 pp | | Messaging Conversations with Automation | ~60% | ~25% (2017) | +35 pp | Item 1A. Risk Factors The company faces risks from fluctuating results, intense competition, evolving regulations, operational challenges, AI technology, and financial instruments - Quarterly revenue and operating results may fluctuate significantly due to factors such as customer acquisition/retention, service innovation, pricing changes, third-party integrations, and economic conditions[92][93][94] - The markets for mobile and online business messaging and digital engagement are highly competitive, with risks from existing competitors and new entrants, potentially leading to pricing pressure and loss of market share[76][95][96] - The business is subject to evolving U.S. and international privacy laws (e.g., GDPR, CCPA), which can increase compliance costs, limit service adoption, and expose the company to fines, litigation, and reputational harm[100][101][102][107] - Exposure to foreign currency exchange rate fluctuations, particularly with the U.S. dollar against NIS, Pound Sterling, Euro, AUS dollar, and Japanese Yen, can adversely affect results of operations[129][130] - Failures or security breaches in services or systems, including cyber-attacks, could lead to loss of proprietary/personal data, litigation, regulatory investigations, and damage to reputation[123][124][125] - The use of Artificial Intelligence (AI) in product offerings presents risks such as flawed algorithms, biased datasets, and ethical issues, which could lead to reputational harm or legal liability[175] - The company has incurred net losses in recent years, with an accumulated deficit of $283.6 million as of December 31, 2019, and may continue to incur losses in the future[187] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - No unresolved staff comments[233] Item 2. Properties LivePerson's headquarters are in New York City, with major R&D, sales, and support offices globally, and data centers across three continents - Corporate headquarters are in New York City (37,000 sq ft, lease expires 2021)[234] - Major international office in Ra'anana, Israel (68,000 sq ft, lease expires 2020) for R&D, sales, and support[234] - Key U.S. offices in Alpharetta, Georgia (40,000 sq ft, lease expires 2024) for sales/support, and Seattle, Washington (38,000 sq ft, lease expires 2020) for R&D[234] - Global presence includes approximately 45,000 sq ft of office space in various locations in the United States, Europe, Asia, and Australia, along with data centers in the U.S., Europe, and Australia[235] Item 3. Legal Proceedings LivePerson is in an IP lawsuit against [24]7 Customer, Inc., with most of [24]7's patents invalidated, expecting no material adverse financial impact - LivePerson filed an intellectual property suit against [24]7 Customer, Inc. in March 2014, alleging reverse engineering and misappropriation of technology[236][594] - [24]7 Customer, Inc. filed two patent infringement suits against LivePerson in 2015, which were consolidated with LivePerson's original suit in California[236][594] - Rulings by the Court and the U.S. Patent Office have invalidated the majority of [24]7's asserted patents[236][594] - Trial for LivePerson's claims is set for April 27, 2020, and for [24]7's patent infringement claims for March 15, 2021[236][594] - The company accrues for probable losses that can be reasonably estimated and believes current litigation will not have a material adverse effect on its business, results of operations, financial condition, or cash flows[238][239][596][597] Item 4. Mine Safety Disclosures The company is not subject to Item 4, Mine Safety Disclosures - Not Applicable[240] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities LivePerson's common stock trades on NASDAQ and TASE, with no cash dividends declared, and a discontinued stock repurchase program saw minor activity - Common stock is traded on The NASDAQ Global Select Market (LPSN) and the Tel Aviv Stock Exchange (LPSN TA)[242] - As of February 11, 2020, there were approximately 148 holders of record of common stock[243] - The company has not declared or paid any cash dividends since its inception and does not anticipate doing so in the foreseeable future[244] Issuer Purchases of Equity Securities (Q4 2019) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | | :----------------------- | :------------------------------- | :--------------------------- | | 10/1/2019 - 10/31/2019 | — | $— | | 11/1/2019 - 11/30/2019 | — | — | | 12/1/2019 - 12/31/2019 | 5,124 | $37.82 | | Total | 5,124 | $— | - A stock repurchase program was in place from 2012 through 2018 and was discontinued at the end of 2018[203][553] Item 6. Selected Consolidated Financial Data Selected consolidated financial data from 2015-2019 highlights increasing revenue, net losses, operating expenses, and significant growth in stock-based compensation Selected Consolidated Statement of Operations Data (2015-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | 2015 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Revenue | $291,609 | $249,838 | $218,876 | $222,779 | $239,012 | | Total costs and expenses | $378,641 | $273,541 | $236,702 | $242,188 | $249,440 | | Loss from operations | $(87,032) | $(23,703) | $(17,826) | $(19,409) | $(10,428) | | Net loss | $(96,071) | $(25,032) | $(18,191) | $(25,873) | $(26,646) | | Basic Net loss per share | $(1.53) | $(0.42) | $(0.32) | $(0.46) | $(0.47) | | Diluted Net loss per share | $(1.53) | $(0.42) | $(0.32) | $(0.46) | $(0.47) | | Adjusted EBITDA | $(13,612) | $19,090 | $18,400 | $19,198 | $21,244 | | Adjusted operating (loss) income | $(29,978) | $4,902 | $6,042 | $7,503 | $9,130 | Selected Consolidated Balance Sheet Data (2015-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | 2015 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Cash and cash equivalents | $176,523 | $66,449 | $56,115 | $50,889 | $48,803 | | Working capital | $107,674 | $7,873 | $13,789 | $17,548 | $39,122 | | Total assets | $512,710 | $290,103 | $232,799 | $219,638 | $226,194 | | Total stockholders' equity | $148,535 | $170,729 | $140,063 | $138,476 | $165,305 | Stock-Based Compensation Expense by Category (2015-2019, in thousands) | Category | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | 2015 (in thousands) | | :------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Cost of revenue | $4,218 | $996 | $448 | $429 | $1,396 | | Sales and marketing | $10,010 | $5,374 | $2,500 | $2,515 | $3,088 | | General and administrative | $12,216 | $4,921 | $3,691 | $3,304 | $3,692 | | Product development | $17,661 | $3,550 | $2,305 | $3,488 | $3,638 | | Total | $44,105 | $14,841 | $8,944 | $9,736 | $11,814 | | YoY Change | +197.18%| +65.93% | -8.13% | -17.59% | - | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This analysis details LivePerson's financial condition and operations, covering AI-powered messaging, revenue growth, rising expenses, net losses, liquidity, and strategic investments - LivePerson's strategy focuses on building awareness and adoption of the Conversational Space, increasing messaging volumes through a broad ecosystem and AI/automation, attracting top AI talent, and bringing best-in-class AI/ML technologies to market[273][275][281][282] Key Financial Highlights (2018-2019) | Metric | 2019 (3 months, $ million) | 2019 (12 months, $ million) | 2018 (3 months, $ million) | 2018 (12 months, $ million) | | :----------------------------------------- | :------------------------- | :-------------------------- | :------------------------- | :-------------------------- | | Revenue | $79.1 | $291.6 | $65.7 | $249.8 | | Revenue Growth | +20% | +17% | - | - | | Business Segment Revenue | $72.8 | $267.1 | $60.7 | $230.3 | | Business Segment Revenue Growth | +20% | +16% | - | - | | Gross Profit Margin | 72% | 73% | 74% | 75% | | Costs and Expenses | $103.6 | $378.6 | $73.0 | $273.5 | | Costs and Expenses Growth | +42% | +38% | - | - | | Net Loss | $27.3 | $96.1 | $6.5 | $25.0 | | Trailing-twelve-month ARPU (Enterprise/Mid-Market) | - | $345,000 | - | $285,000 | | Revenue Retention Rate (Enterprise/Mid-Market) | - | 105%-115% | - | ~110% | Revenue by Segment (2017-2019, in thousands) | Segment | 2019 (in thousands) | 2018 (in thousands) | % Change (2019 vs 2018) | 2017 (in thousands) | % Change (2018 vs 2017) | | :-------- | :---------- | :---------- | :---------------------- | :---------- | :---------------------- | | Business | $267,129 | $230,285 | 16% | $201,426 | 14% | | Consumer | $24,480 | $19,553 | 25% | $17,450 | 12% | | Total | $291,609| $249,838| 17% | $218,876| 14% | Cost of Revenue - Business (2017-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | % Change (2019 vs 2018) | 2017 (in thousands) | % Change (2018 vs 2017) | | :------------------------- | :---------- | :---------- | :---------------------- | :---------- | :---------------------- | | Cost of revenue - Business | $74,460 | $58,420 | 27% | $54,600 | 7% | | Percentage of total revenue| 26% | 23% | +3 pp | 25% | -2 pp | | Headcount (at period end) | 257 | 228 | 13% | 205 | 11% | Sales and Marketing - Business (2017-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | % Change (2019 vs 2018) | 2017 (in thousands) | % Change (2018 vs 2017) | | :----------------------------- | :---------- | :---------- | :---------------------- | :---------- | :---------------------- | | Sales and Marketing - Business | $140,880 | $94,339 | 49% | $82,420 | 14% | | Percentage of total revenue | 48% | 38% | +10 pp | 38% | 0 pp | | Headcount (at period end) | 449 | 352 | 28% | 291 | 21% | Product Development Costs (2017-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | % Change (2019 vs 2018) | 2017 (in thousands) | % Change (2018 vs 2017) | | :----------------------------- | :---------- | :---------- | :---------------------- | :---------- | :---------------------- | | Product development | $82,145 | $55,707 | 47% | $40,034 | 39% | | Percentage of total revenue | 28% | 22% | +6 pp | 18% | +4 pp | | Headcount (at period end) | 451 | 369 | 22% | 342 | 8% | Net Loss (2017-2019, in thousands) | Year | Net Loss (in thousands) | YoY Change | | :--- | :---------- | :--------- | | 2019 | $(96,071) | +283.79% | | 2018 | $(25,032) | +37.60% | | 2017 | $(18,191) | - | Cash Flows Summary (2017-2019, in thousands) | Activity | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :----------------------------- | :---------- | :---------- | :---------- | | Operating Activities | $(59,158) | $4,779 | $10,290 | | Investing Activities | $(48,506) | $(27,773) | $(15,320) | | Financing Activities | $217,851 | $33,926 | $7,209 | | Cash and Cash Equivalents (End of Year) | $176,523 | $66,449 | $56,115 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section outlines LivePerson's market risks, including currency fluctuations, accounts receivable collection, and interest rate exposure, with mitigation strategies - The company is exposed to currency rate fluctuation risk, particularly with the U.S. dollar against the New Israeli Shekel (NIS), Pound Sterling, Euro, AUS dollar, and Japanese Yen, due to international operations[381][382] - A 1% increase or decrease in the value of the NIS would impact income before income taxes by approximately $0.7 million, based on 2018 exposure[381] - Accounts receivable are subject to collection risks; the allowance for doubtful accounts increased from $2.3 million in 2018 to $3.1 million in 2019, reflecting ongoing assessment of credit risks and longer payment cycles from large corporate customers[383] - The company's investments primarily consist of cash and cash equivalents, which are not materially affected by changes in market interest rates[384] - Inflation has not had a material effect on the business, but significant inflationary pressures could harm financial results if not offset by price increases[385] Item 8. Consolidated Financial Statements and Supplementary Data This item presents LivePerson's audited consolidated financial statements for 2017-2019, covering balance sheets, operations, comprehensive loss, equity, cash flows, and detailed notes - The consolidated financial statements were audited by BDO USA, LLP, who expressed an unqualified opinion[390] - The company adopted ASC Topic 842, Leases, on January 1, 2019, resulting in the recording of approximately $10.0 million in additional net lease assets and lease liabilities[392][479] Consolidated Balance Sheets (as of December 31, in thousands) | Asset/Liability | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------ | :---------- | :---------- | | Cash and cash equivalents | $176,523 | $66,449 | | Accounts receivable, net | $87,620 | $46,023 | | Total current assets | $278,107 | $121,724 | | Property and equipment, net | $76,236 | $43,735 | | Goodwill | $94,987 | $95,031 | | Total assets | $512,710 | $290,103 | | Accounts payable | $12,302 | $8,174 | | Accrued expenses | $62,778 | $50,662 | | Deferred revenue | $88,751 | $55,015 | | Convertible senior notes, net | $179,012 | $— | | Total liabilities | $364,175 | $119,374 | | Total stockholders' equity | $148,535 | $170,729 | Consolidated Statements of Operations (Year Ended December 31, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | | Revenue | $291,609 | $249,838 | $218,876 | | Cost of revenue | $78,878 | $62,479 | $58,205 | | Sales and marketing | $156,814 | $103,344 | $90,905 | | General and administrative | $56,967 | $45,873 | $43,124 | | Product development | $82,145 | $55,707 | $40,034 | | Loss from operations | $(87,032) | $(23,703) | $(17,826) | | Net loss | $(96,071) | $(25,032) | $(18,191) | | Basic Net loss per share | $(1.53) | $(0.42) | $(0.32) | | Diluted Net loss per share | $(1.53) | $(0.42) | $(0.32) | Consolidated Statements of Cash Flows (Year Ended December 31, in thousands) | Activity | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :----------------------------------------- | :---------- | :---------- | :---------- | | Net cash (used in) provided by operating activities | $(59,158) | $4,779 | $10,290 | | Net cash used in investing activities | $(48,506) | $(27,773) | $(15,320) | | Net cash provided by financing activities | $217,851 | $33,926 | $7,209 | | Change in cash and cash equivalents | $110,074 | $10,334 | $5,226 | | Cash and cash equivalents - End of year | $176,523 | $66,449 | $56,115 | - In March 2019, the company issued $230.0 million in 0.750% Convertible Senior Notes due 2024, with net proceeds of approximately $221.4 million after deducting issuance costs. The notes are convertible into common stock under certain conditions[504][505][509] - The company entered into capped call option transactions for $23.2 million to reduce potential dilution from note conversions, recorded as a reduction to additional paid-in capital[517] - Goodwill and intangible assets are tested for impairment annually; no impairment was recognized for 2019, 2018, or 2017[499] - Restructuring costs in 2019 were $2.0 million, a 54% decrease from $4.5 million in 2018, primarily due to resource reallocation for platform transformation and severance costs[336][599][600] Report of Independent Registered Public Accounting Firm BDO USA, LLP issued an unqualified opinion on LivePerson's 2019 financial statements and internal control, noting ASC Topic 842 adoption and critical audit matters - BDO USA, LLP issued an unqualified opinion on LivePerson's consolidated financial statements for the period ended December 31, 2019[390] - The firm also audited the company's internal control over financial reporting and expressed an unqualified opinion on its effectiveness as of December 31, 2019[391] - A change in accounting principle for leases due to the adoption of ASC Topic 842 became effective January 1, 2019[392] - Critical audit matters included revenue recognition for contracts with multiple performance obligations and the accounting evaluation of convertible notes, both requiring significant auditor judgment and specialized knowledge[396][397][398][399][400] Consolidated Balance Sheets LivePerson's Consolidated Balance Sheets as of December 31, 2019 and 2018, detail assets, liabilities, and stockholders' equity Consolidated Balance Sheets (as of December 31, in thousands) | Asset/Liability | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------ | :---------- | :---------- | | Cash and cash equivalents | $176,523 | $66,449 | | Accounts receivable, net | $87,620 | $46,023 | | Prepaid expenses and other current assets | $13,964 | $9,252 | | Total current assets | $278,107 | $121,724 | | Operating lease right of use asset | $15,680 | $— | | Property and equipment, net | $76,236 | $43,735 | | Contract acquisition costs | $31,965 | $13,361 | | Intangibles, net | $11,812 | $13,832 | | Goodwill | $94,987 | $95,031 | | Deferred tax assets | $2,179 | $713 | | Other assets | $1,744 | $1,707 | | Total assets | $512,710| $290,103| | Accounts payable | $12,302 | $8,174 | | Accrued expenses and other current liabilities | $62,778 | $50,662 | | Deferred revenue | $88,751 | $55,015 | | Operating lease liability | $6,602 | $— | | Total current liabilities | $170,433 | $113,851 | | Deferred revenue, net of current portion | $438 | $222 | | Convertible senior notes, net | $179,012 | $— | | Other liabilities | $72 | $4,205 | | Operating lease liability, net of current portion | $12,865 | $— | | Deferred tax liability | $1,355 | $1,096 | | Total liabilities | $364,175| $119,374| | Common stock | $67 | $64 | | Additional paid-in capital | $436,557 | $362,590 | | Treasury stock, at cost | $(3) | $(3) | | Accumulated deficit | $(283,562) | $(187,491) | | Accumulated other comprehensive loss | $(4,524) | $(4,431) | | Total stockholders' equity | $148,535| $170,729| | Total liabilities and stockholders' equity | $512,710| $290,103| Consolidated Statements of Operations This section presents LivePerson's Consolidated Statements of Operations for 2017-2019, detailing revenue, expenses, and net loss Consolidated Statements of Operations (Year Ended December 31, in thousands, except per share data) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | | Revenue | $291,609 | $249,838 | $218,876 | | Cost of revenue | $78,878 | $62,479 | $58,205 | | Sales and marketing | $156,814 | $103,344 | $90,905 | | General and administrative | $56,967 | $45,873 | $43,124 | | Product development | $82,145 | $55,707 | $40,034 | | Restructuring costs | $2,043 | $4,468 | $2,594 | | Amortization of purchased intangibles | $1,794 | $1,670 | $1,840 | | Total costs and expenses | $378,641 | $273,541 | $236,702 | | Loss from operations | $(87,032) | $(23,703) | $(17,826) | | Interest (expense) income | $(7,407) | $22 | $26 | | Other income (expense), net | $1,213 | $(493) | $110 | | Total Other (expense) income, net | $(6,194) | $(471) | $136 | | Loss before provision for income taxes | $(93,226) | $(24,174) | $(17,690) | | Provision for income taxes | $2,845 | $858 | $501 | | Net loss | $(96,071) | $(25,032) | $(18,191) | | Net loss per share (Basic) | $(1.53) | $(0.42) | $(0.32) | | Net loss per share (Diluted) | $(1.53) | $(0.42) | $(0.32) | | Weighted-average shares (Basic) | 62,593,026 | 59,203,400 | 56,358,017 | | Weighted-average shares (Diluted) | 62,593,026 | 59,203,400 | 56,358,017 | Stock Compensation Expense (Year Ended December 31, in thousands) | Category | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :------------------------- | :---------- | :---------- | :---------- | | Cost of revenue | $4,218 | $996 | $448 | | Sales and marketing | $10,010 | $5,374 | $2,500 | | General and administrative | $12,216 | $4,921 | $3,691 | | Product development | $17,661 | $3,550 | $2,305 | Depreciation and Amortization Expense (Year Ended December 31, in thousands) | Category | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :------------------------- | :---------- | :---------- | :---------- | | Cost of revenue | $8,557 | $7,831 | $7,150 | | Sales and marketing | $1,642 | $1,520 | $1,625 | | General and administrative | $908 | $1,083 | $1,226 | | Product development | $5,259 | $3,754 | $2,357 | Amortization of Purchased Intangibles (Year Ended December 31, in thousands) | Category | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :------------------------- | :---------- | :---------- | :---------- | | Cost of revenue | $1,138 | $1,143 | $2,842 | Consolidated Statements of Comprehensive Loss This section presents LivePerson's Consolidated Statements of Comprehensive Loss for 2017-2019, including net loss and foreign currency translation adjustments Consolidated Statements of Comprehensive Loss (Year Ended December 31, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | | Net loss | $(96,071) | $(25,032) | $(18,191) | | Foreign currency translation adjustment | $(93) | $(1,896) | $3,625 | | Comprehensive loss | $(96,164)| $(26,928)| $(14,566)| Consolidated Statements of Stockholders' Equity LivePerson's Consolidated Statements of Stockholders' Equity for 2017-2019 detail changes in common stock, paid-in capital, accumulated deficit, and comprehensive loss Consolidated Statements of Stockholders' Equity (Year Ended December 31, in thousands, except share data) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--------------------------------------- | :---------- | :---------- | :---------- | | Balance at December 31 (Shares) | 66,543,073 | 63,676,229 | 59,663,969 | | Common Stock Amount | $67 | $64 | $60 | | Treasury Stock Shares | (2,709,830) | (2,681,285) | (2,587,535) | | Treasury Stock Amount | $(3) | $(3) | $(3) | | Additional Paid-in Capital | $436,557 | $362,590 | $305,676 | | Accumulated Deficit | $(283,562) | $(187,491) | $(163,135) | | Accumulated Other Comprehensive Loss | $(4,524) | $(4,431) | $(2,535) | | Total Stockholders' Equity | $148,535| $170,729| $140,063| - Key changes in stockholders' equity for 2019 include proceeds from common stock issuance ($16,918k), stock-based compensation ($25,083k), equity component of convertible senior notes ($52,900k), and purchase of capped call option ($(23,184)k)[415] Consolidated Statements of Cash Flows This section presents LivePerson's Consolidated Statements of Cash Flows for 2017-2019, detailing cash flows from operating, investing, and financing activities Consolidated Statements of Cash Flows (Year Ended December 31, in thousands) | Activity | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :----------------------------------------- | :---------- | :---------- | :---------- | | Net cash (used in) provided by operating activities | $(59,158) | $4,779 | $10,290 | | Net cash used in investing activities | $(48,506) | $(27,773) | $(15,320) | | Net cash provided by financing activities | $217,851 | $33,926 | $7,209 | | Effect of foreign exchange rate changes on cash and cash equivalents | $(113) | $(598) | $3,047 | | Change in cash and cash equivalents | $110,074 | $10,334 | $5,226 | | Cash and cash equivalents - Beginning of the year | $66,449 | $56,115 | $50,889 | | Cash and cash equivalents - End of the year | $176,523 | $66,449 | $56,115 | - Net cash used in operating activities was $(59.2) million in 2019, a significant decrease from $4.8 million provided in 2018, primarily due to increased net loss and changes in working capital[351][418] - Net cash provided by financing activities increased substantially to $217.9 million in 2019, driven by proceeds from convertible senior notes issuance ($230.0 million) and common stock issuance ($21.1 million), partially offset by capped call purchases ($23.2 million)[353][418] - Capital expenditures, including capitalized software, were $47.6 million in 2019, up from $21.9 million in 2018[352][418] Notes to Consolidated Financial Statements This section provides detailed notes to LivePerson's consolidated financial statements, explaining significant accounting policies and other financial disclosures Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with accountants on accounting and financial disclosure matters - Not Applicable[601] Item 9A. Controls and Procedures Management and BDO USA, LLP concluded LivePerson's internal control over financial reporting and disclosure controls were effective as of December 31, 2019 - Management concluded that internal control over financial reporting was effective as of December 31, 2019, based on the COSO framework[602] - BDO USA, LLP provided an unqualified opinion on the effectiveness of internal control over financial reporting[603][608] - Management also concluded that disclosure controls and procedures were effective as of December 31, 2019[606] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control during the quarter ended December 31, 2019[605] Item 9B. Other Information The company reported no other information required by this item - None[615] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance, including the Code of Ethics, is incorporated by reference from the 2020 proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement[617] - The company has a Code of Ethics for its CEO and senior financial officers, available on its investor relations website[619] Item 11. Executive Compensation Executive compensation details, including the Compensation Discussion and Analysis, are incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information on executive compensation is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement[620] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership details for beneficial owners and management, along with equity compensation plan information, are incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information on security ownership and related stockholder matters is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement[621] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement[623] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services, including pre-approval policies, is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information on principal accountant fees and services is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement[624] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists financial statements and exhibits filed with the Form 10-K, with financial statements incorporated by reference from Item 8 - Financial statements are incorporated by reference to Item 8 of this Annual Report on Form 10-K[626] - No financial statement schedules are filed[626] - Exhibits are incorporated by reference to the Exhibit Index[626] Item 16. Form 10-K Summary The company reported no Form 10-K Summary - None[627]